Ex Volkswagen CEO, D&O insurers to pay large penalties over emissions scandal

Ex Volkswagen CEO, D&O insurers to pay large penalties over emissions scandal | Insurance Business

Ex Volkswagen CEO, D&O insurers to pay large penalties over emissions scandal

The former CEO of Volkswagen has agreed to shell out a hefty settlement for what the company said was his failure to quickly investigate the 2015 scandal over diesel engines rigged to cheat on emissions tests.

Martin Winterkorn will pay €11.2 million (around NZ$18.9 million) in compensation, according to a report by the Associated Press. The former CEO’s payment is his share of a €288 million settlement with Volkswagen by him and three other former managers.

The auto manufacturer said it would get €270 million from liability insurance covering loss due to the actions of directors and officers, the AP reported.

Rupert Stadler, former head of the Audi luxury car division, will pay €4.1 million. Former Audi executive Stefan Knirsch will hand over €1 million, and former Porsche executive Wolfgang Hatz will pay €1.5 million.

More than 30 insurers were also involved in the settlement talks, according to the AP. The settlement must be approved by the company’s annual shareholder meeting July 22.

Volkswagen said in a statement that Winterkorn “breached his duties of care” as CEO. The automaker based that conclusion on an extensive investigation by a law firm it commissioned to look into the scandal.

The Environmental Protection Agency caught Volkswagen using software that let its cars pass emissions test, then deactivated air-pollution controls during normal driving, according to the AP. Winterkorn, who has denied any wrongdoing, resigned a few days after the EPA issued a notice of violation in September 2015. Volkswagen has apologised and shelled out more than €31 billion in fines, recall costs and compensation to car owners.

The EPA was alerted to the emissions cheat in 2014 by a study by West Virginia University’s Center for Alternative Fuels, Engines & Emissions. Volkswagen claimed that the increased emissions were the result of technical problems, not illegal software, the AP reported.

The automaker’s internal investigation found that from July 2015, Winterkorn failed “to comprehensively and promptly clarify the circumstance behind the use of unlawful software functions” in the offending vehicles. Volkswagen also said that Winterkorn failed to ensure that the company answered questions from US regulators “truthfully, completely and without delay.”

Prosecutors in Berlin have also charged the former CEO with making false statements to a parliamentary committee, the AP reported. They said that Winterkorn had falsely claimed that he learned of the illegal software only in September 2015 rather than May 2015.